Delaware Trust Company argued that adequate protection payments and plan distributions must be distributed according to the payment waterfall in an inter-creditor agreement among the TCEH first lien creditors. The plaintiff further argued that the payment waterfall required an allocation method that accounted for accrued but unpaid post-petition interest at the default contractual interest rates, which the plaintiff alleged was significantly higher for the bond debt (even though no post-petition interest was being paid in the case.) Delaware Trust Company’s motion was premised on the fact that the plan of reorganization, upon which the court’s opinion was predicated, had failed to consummate and a new plan had become effective.

On April 26, 2017, Cleary successfully argued that the new plan was identical in all material respects to the prior plan and that its tax implications, including a substantial step-up in basis for certain collateral, did not mean there had been a sale or disposition of shared collateral. On April 27, 2017, the bankruptcy court affirmed its prior analysis as applied to the new plan.